It's hard to really appreciate our financial journey until we look back and realise how far we've come.
Of course, when looking back we also realise the many mistakes we've made along the way but each experience has contributed one way or another in making us wiser and more discerning.
Investing isn't the only way to build and grow one's financial foundation.
But I find it more appealing from the viewpoint that it can be both active and passive. Also, our time towards working for money is capped but it isn't much so when it comes to money working for us.
A Premise For Investing
When starting from scratch, the ratio between income and expenses is usually tight or in favour of expenses.
So this leaves little to no room for saving and investing. Which means building a financial foundation hardly comes into the picture.
Suppose we climb up the financial hierarchy and secure a high paying job while still having a relatively moderate expenses, are we financially secure or have a financial foundation?
In a way, the answer for the moment is a resounding yes, especially the financial security part.
But is not so for the foundational part, as this foundation is entirely dependent on us to keep showing up and do our part.
Which in practical terms is unfeasible since we're only humans. Besides, if a loss of job happens, the foundation cease to exist.
In my view, one of the main premises of investing is building income streams that are not entirely dependent on you to work or function.
Centralized and Decentralized Analogy
It's akin to the centralization and decentralization concept. In which centralization has a single point of failure to destabilize or shutdown a system but this isn't the case with decentralization. We're akin a centralized entity if our income is mostly dependent on us to show up and do the work.
Now, this doesn't imply that there's something inherently wrong or bad in being a centralized entity like depicted above. The problem is seeing it as a fixed or permanent state when it is actually transitionary.
What I mean by that is we should always strive to 'decentralize' our income sources in order to create income streams that can sustain us in times of uncertainty or crisis.
By doing so, we can reduce our dependence on our active income, which may be affected by factors beyond our control, such as market fluctuations, health issues, or job loss.
Investing wisely hinges on the fact that investing isn't a one-time activity, but a continuous process of learning, experimenting and improving. As long as we continue the process, wisdom will grow like a seed turning into a tree.
From that viewpoint, investing is also a great tool towards building a strong financial foundation and aid in achieving long term financial goals.
When it comes to income sources, the pitfall of centralization is that pushed to the extreme, it is a vulnerable and hard to sustain 'state of operation'.
However, this doesn't mean decentralization is without flaws. Because taking things off the ground can be very hard.
But when the foundation is in place, it can be a resilient and an adaptable income source(s).
Thanks for reading!! Share your thoughts below on the comments.
The financial guru himself... I hail thee. It gives me great pleasure to always learn from your posts about becoming financially stable. Thanks for the tips as they are usually on point.
Having both passive and active income will do some good to our future as well..cos when one drops, there are more to fall back on
Yes, indeed! It's also a safer bet during times of uncertainty. Both a needed live a more financially better life that can be sustainable.
Lol, thanks for stopping by as always. I appreciate it :)
My pleasure
Yay! 🤗
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